Historic day in the coal sector yesterday. With one of the world’s largest producers saying that it may soon disappear completely.
That’s Peabody Energy. America’s top coal miner, and the most high-profile firm in the West when it comes to the beleaguered coal industry.
Peabody said in a filing to the U.S. Securities and Exchange Commission that its ability to operate as a going concern is now in doubt. As the company noted, “There can be no assurance that our plan to improve our operating performance and financial position will be successful. We may need to voluntarily seek protection under Chapter 11.” Related: Putin’s Dilemma: To Sell Or To Nationalize Oil Assets
The news comes after Peabody missed payment Tuesday on $71 million in interest due on $1.65 billion worth of bonds. The company has now entered into a 30-day grace period to make the payments.
For investors, the carnage was severe — with Peabody’s share price taking its biggest-ever intraday drop, falling as much as 49.9 percent. As the chart below shows, the stock is down more than 99.5 percent since 2011.
(Click to enlarge) Related: Oil Won’t Stage A Serious Rebound Until This Happens
All of this comes as a result of the incredibly depressed state of global coal markets. And although Peabody was the poster child this week, there were plenty of other woes globally in this business.
Just a day before the Peabody announcement, fellow U.S. coal miner Foresight Energy told investors it may also have to declare bankruptcy. This after the firm missed $23.6 million in interest payments on its $1.5 billion debts.
And it’s not just in America that coal miners are hurting. In Poland yesterday, three state-run firms announced plans to bail out local producer Kompania Weglowa (KW) — the largest miner of hard coal in Europe. Related: Oil Up As Saudis Mull Production Freeze Without Iran
The government firms plan to contribute $387 million to keep KW alive, after the company had reportedly been pushed to verge of bankruptcy. An event that could still happen, if the European Union objects to Poland using state funds to intervene in the private sector here.
All of which shows just how deep the pain is today in the global coal business. Leading to the question — who will be left in global production? Right now, things look bleak outside of go-to producing nations like Australia, Indonesia, and South Africa.
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Watch for more corporate troubles from the marginal suppliers, and perhaps beyond.
Here’s to the end of an era (?).
Dave Forest
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